Dixons Carphone share price rises as electronics retailer phones in healthy revenue growth

 
Jasper Jolly
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Carphone Warehouse And Dixons Agree £3.8bn Merger
Dixons and Carphone Warehouse merged in 2014 (Source: Getty)

Dixons Carphone phoned in a revenue rise of nine per cent in the year up to the end of April, as the continued boost from the weak pound made up for a weak fourth quarter in its British home market.

Shares in the FTSE 250-listed company (after it was booted from the FTSE 100 in March) rose by more than 2.5 per cent at the time of writing.

The figures

Group reported revenues rose by nine per cent for the full year, with a six per cent rise in the fourth quarter – although these numbers were reduced to four per cent and two per cent revenue growth respectively when the currency effect was taken out.

The company guided profit before tax for the year will be in the range of £485m to £490m (after previous guidance of £475m to £495m).

Like-for-like revenues rose by four per cent for the year, a two per cent increase in the fourth quarter.

UK and Ireland revenues rose two per cent in the full year after dipping by one per cent in the fourth quarter.

That made the British Isles the weakest region for the group, with Nordic revenues rising by five per cent and Southern European revenues up four per cent (although both were boosted by 20 per cent when the weak pound was taken into account).

Why it’s interesting

Growth in crucial like-for-like sales rose came in slightly higher than expected in the fourth quarter, pleasing analysts and pushing profit guidance to the top end of previous forecasts.

UK and Ireland sales (which account for more than half of revenues) were affected by the late launch of the new Samsung Galaxy S8 and the odd timing of Easter which has thrown data off around the world.

However, the merger from 2014 of Dixons and Carphone Warehouse seems to be paying dividends for the group, with store rationalisations completed successfully and a more diversified approach to consumer electronics (including online and offline working together) paying off.

British retail is on the front line for the UK consumer, and the UK consumer is not expected to fare well as rising prices (the pass-through from the fall in sterling) outpace wage increases. But Dixons Carphone is relatively well protected, with revenue streams in other regions performing well before currency fluctuations.

Growth in the connected world services business launched in 2013 also looks promising, with the potential to broaden the group’s exposure to business clients.

What Dixons Carphone said

Seb James, Dixons Carphone chief executive, said: “I am pleased to be reporting on another good year at Dixons Carphone. Despite a lively political backdrop, we have been able to continue to grow our business and maintain very high levels of customer satisfaction across the Group.

We have continued to evolve our approach to multi-channel and we have gained an even better understanding of how the online and offline worlds work together to help customers make great choices on these important and life-enhancing technologies.

On the British and Irish market, he said: “Our view is that the UK consumer continues to be active in the market, but we anticipate no let-up in their – very rational – view that price and service are critical factors in deciding where to shop.”

In short

Investors were happy with Dixons Carphone's latest report, and management are confident, despite the well known risks to consumer spending in its key market.